The 2020 Housing Market Snapshot with Reduce Home Loans

As we prepare to enter 2021, Reduce Home Loans looks back at the last 12 months of property values and shares insights into how you might be able to nab a rock-bottom mortgage rate in 2021.

 

It’s been a rollercoaster year for homeowners and would-be buyers alike. The impacts of the Covid-19 pandemic on Australian households, as well as the economy, has ricocheted across almost all aspects of life as we know it.

The effects of the deadly virus cannot be understated, as the country battles recovering from its first recession in decades with a high unemployment rate. Many households were forced to defer their mortgage repayments as thousands struggled with job losses and overall uncertainty.

 

Property investors have been feeling the pinch too, as strict travel restrictions meant that migration levels – particularly from students – has declined dramatically. The over 2 million Aussie landlords were faced with decreasing property values, falling rent prices and struggling tenants unable to meet rent payments.

 

As the number of Australians afflicted with Coronavirus began spiking in March, the Australian Government began offering support in the form of two main assistance packages: JobKeeper and JobSeeker. This aimed to help those who had lost their jobs, as well as business owners struggling with decreased revenue, keep employers earning an income.

Strict distancing restrictions and work-from-home regulations meant that more Aussies were staying home than ever before. These restrictions unfortunately assisted in decreasing dwelling values, as budding homeowners were less able to view real estate opportunities.

 

However, not only did the desire to own property increase, but the number of first-home buyers grew too. Interestingly, Australians looking for a sea or tree change increased too, as work-from-home rules meant that workers were no longer confined to tiny, capital city apartments.

Using CoreLogic data, let’s take a look at the last twelve months of dwelling values.

 

 

National dwelling values

The value of dwellings (houses and units combined) across Australia since November last year painted a similar picture to the impacts of the Covid-19 pandemic – not only in terms of the number of those afflicted, but the economic impacts on our biggest cities too.

Source: CoreLogic Home Value Index – 31/10/19 – 01/12/2020.

While year-on-year values have risen, there was an uncharacteristic drop from May to August due to the Covid-19 pandemic, with prices only beginning to recover in September.

However, it’s worth noting that the biggest fluctuations were driven by changes in the capital cities, particularly Sydney and Melbourne. In fact, house prices declined by only 1.7 per cent in response to Covid-19 across all capital cities and regional areas.

Source: CoreLogic Home Value Index – 31/10/19 – 01/12/2020.

As prices began to fall nationally in May, both Hobart and Canberra recorded increases in dwelling values month-on-month, rising 0.8 per cent and 0.5 per cent respectively.

If you were betting on a city to be “safe as houses”, Canberra experienced no negative dwelling value changes month-on-month this year, even when Hobart values dipped in 2020. The nation’s capital did record a zero per cent change in April though.

In fact, when you compare the average dwelling value of all capital cities combined, the peak-to-trough loss was only 1.25 per cent.

 

Sydney dwelling values

The rise and fall of Sydney’s dwelling values over 2020 may have been bad news for homeowners looking to sell, but surprising news for would-be buyers struggling to get a foot on the property market.

The impacts of the COVID-19 pandemic on the Sydney housing market meant that, like many other capital cities, stricter regulations made actually getting to view a property that much more difficult. And when paired with increased unemployment rates and overall uncertainty, dwelling prices began to fall across the harbour city.

Source: CoreLogic Home Value Index – 31/10/19 – 01/12/2020.

Following the brutal summer bushfires, Sydney’s dwelling values began increasing, peaking at $889,992 in April 2020. Dwelling values then began to fall until August and started recovering shortly after.

These fluctuations coincide with the rise in Covid-19 infections across the city and the implementation of distance restrictions, as Sydney grappled with the impacts of the Coronavirus pandemic on its economy.

Interestingly, this drop created a rare window of opportunity for first-home buyers in Sydney, who were not used to seeing dwelling values fall. And thanks to the record low-rate environment we’re currently in, home loan interest rates have never been more affordable. Together with the First Home Buyer Deposit Scheme, a record number of first-home buyers began entering the property market.

Australian Bureau of Statistics (ABS) data found that 13,040 first-home buyer loans were approved in September. This was an increase of 6 per cent from the previous month, and a sharp increase of 45 per cent from September 2019.

 

Melbourne Dwelling Values

It’s impossible to discuss dwelling values across Melbourne without talking about the devastating impact Covid-19 had on the city. Facing one of the toughest lock-down restrictions of any other city in the world, 111 days of stay-at-home restrictions meant that dwelling values – as well as the mental health of residents – took a nose-dive in 2020.

The Australian Government estimated that Victorian residents were losing an average of about 1,200 jobs a day, and cut around $100 million a day from economic activity in Melbourne throughout August and September.

In fact, Melbourne dwelling values have only really begun recovering as of November this year.

Source: CoreLogic Home Value Index – 31/10/19 – 01/12/2020.

Regularly ranked as one of the most liveable cities in the world, Melbourne’s dwelling values began falling in May, decreasing by 4.2 per cent between its peak in April and lowest point post-Covid-19 in October.

The optimistic rise in the last month has been helped by the current low-rate environment, as well as debt serviceability. Hopefully, homeowners in Melbourne will continue to see values continue to recover throughout 2021.

 

Brisbane Dwelling Values

The Brisbane housing market was able to somewhat overcome the Covid-19 downturn thanks to an increase in interstate migration from buyers seeking a sea change.

Interstate demand for property has increased 20 per cent across the sunshine state from last year, according to Real Estate Institute of Queensland (REIQ) chief executive officer, Antonia Mercorella. And the rising property prices may be attributed to lack of supply for these interstate migrants looking to leave the big cities behind.

Source: CoreLogic Home Value Index – 31/10/19 – 01/12/2020.

In Brisbane specifically, while dwelling values did fall between May and July, the recovery time was significantly quicker than that of Sydney and Melbourne. Dwelling values have increased 2.4 per cent from August to November alone.

It should be said that border closures between Queensland and the other states and territories may have slowed interstate migration. But now borders have opened up again, markets may increase dramatically – particularly in areas close to the New South Wales border such as the Gold Coast.

REIQ corporate affairs manager, Olivier Bleylock noted that a “25 per cent increase to interstate migration next year would put further upward pressure on the cost of housing”.

 

Home loans in 2021

The Reserve Bank of Australia (RBA) also took action in March, cutting the cash rate to a new record low not once, but twice – with an emergency second cut coming mid-March.

A third cut for 2020 then came at the start of November, with interest rates on home loans now at historic lows. This means that taking out a mortgage has never been more affordable in terms of interest repayments.

So, what does this mean for homeowners and would-be buyers as we move into the new year?

Home buyers

It appears that for some capital cities, particularly Sydney and Melbourne, the window for first-home buyers to nab a more affordable property may be closing. While it’s unsure when prices may reach the peaks of 2017, as the economy continues to recover, so too may the housing market.

There are a few key things to consider if you’re buying property in these Covid-19 times:

  1. Stability is key;
  2. Risks are higher; and
  3. Interest rates are low.

First-home buyers may want to consider striking while the iron is hot. This means stepping up the amount you and/or a partner have been putting aside for a property, considering the First Home Buyer Deposit Scheme and even working with a broker to help get your application approved.

 

Refinancers

Reduce Home Loans predicts that the current low-rate home loan environment will help more and more Aussies pay down their expensive mortgages, particularly if they switch to a lower rate loan.

As of the time of writing this, there are a range of loan options from Reduce Home Loans that start with a 1. Never before have interest rates been so affordable for everyday Aussies.

For example, for a household with a 30-year, $400,000 home loan paying a rate of 2.5 per cent, they could save $147 a month by switching to Reduce Home Loan’s 1.77 per cent Rate Cutter Variable loan. That’s a saving of $1746 in just a year.

If you’re willing to do a little paperwork, there could be thousands of dollars in savings over the life of your new loan just by refinancing in 2021.

 

For more information, or to find out if you’re eligible for a home loan from Reduce by calling us on 1300 733 823 or submit an enquiry online. Standard lending and servicing criteria apply.

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.